The German financial supervisory authority, BaFin, will tackle greenwashing in the near future without referring to firm guidelines that it has decided to put on hold.
The guidelines to fight greenwashing, announced last August which started a consultation process, are on hold as the current environment is not sufficiently stable for long-lasting regulations, a spokesperson for the regulator told IPE.
The regulator has therefore not set a plan or a timeline to implement the guidelines, despite greenwashing being a relevant topic as the raids of DWS and Deutsche Bank’s offices have shown.
BaFin was involved in the raids alongside officials from the public prosecutor office in Frankfurt and the German federal criminal police.
It will continue to take action against greenwashing regardless of the guidelines, the spokesperson said, adding that, for example, the regulator assesses the annual audit reports for each fund and each asset management company under supervision.
“In these reports auditors determine, among other things, whether an asset management company has complied with its legal obligations and whether a fund was managed in line with its investment requirements in the past financial year, or whether these were violated,” the spokesperson said.
This also includes ESG requirements applicable to an investment fund, the spokesperson added.
In its annual press conference in May, BaFin’s president Mark Branson explained that a dynamic regulatory, energy and geopolitical situation had led to postponing the implementation of the guidelines for sustainable investment funds.
Branson added, however, that BaFin would continue to apply in practice certain principles already put forward for consultation. For example, sustainable funds must invest at least 75% of assets sustainably, he added.
Foggy way ahead
Branson’s decision to hold on to the principles of the guidelines on greenwashing without formally setting up a firm framework seems to have caught the fund industry association BVI by surprise.
“We have dealt intensively with the topic of the BaFin guidelines since autumn last year. We have seen a consultation, then we have not seen anything for months, and then [we saw] the press conference where the president says that the guidelines will not come, [but] we will apply them anyway in the version of the draft that has not yet been discussed with us,” BVI´s CEO Thomas Richter said in the podcast Nachdenken.
The fact that BaFin will not apply the guidelines because of uncertainties caused by geopolitical tensions and the energy market, but sticking to the principles on greenwashing put forward for consultation is “legally more than questionable”, Richter added.
Meanwhile, BVI has been in talks with BaFin on how to proceed. “We understand that BaFin will hold on to the principles of the draft, however in a slimmer form, with some concessions on the topic of minimum exclusion, but we don’t really know exactly,” said Magdalena Kuper, head of sustainability at BVI.
Kuper added that recently European Securities and Markets Authority (ESMA) has published a supervisory briefing for supervisory authorities on the implementation of the disclosures with principle-based requirements to label a fund sustainable that can lead to different approaches towards sustainability and greenwashing at European and national level.
“ESMA says that under the disclosure regulation, funds can be labelled as sustainable if they have the status of article 9 or article 8 plus, that oblige a certain share of sustainable investments or taxonomy conform investments,” and that differs from what is included in the BaFin guidelines, she said.